China stocks fell Wednesday, as reports indicated government officials want gaming companies such as NetEase (NTES) and Tencent Holdings (TCEHY) to ensure they’re adhering to recently imposed regulations.
The intent is to protect the physical and mental health of minors. For investors, however, the warnings brought on headaches as China stocks tanked across the board.
The drop also follows a page one editorial on the topic of internet regulation that published Tuesday in the country’s largest newspaper, the People’s Daily.
The editorial in the official newspaper of the Chinese Communist Party focused on the numerous measures China has taken in regards to regulations and matters that focus on antitrust and what China sees as unfair business practices.
China also indicated the worst of the crackdown may be over, saying, “The results have been achieved, and the fair competition order in the market has been steadily improving.”
Will The Pressure Ease On China Stocks?
“I think ‘have been achieved’ is a key line as it would indicate we are closer to the end,” wrote Brendan Ahern, chief investment officer at KraneShares, where he focuses on China stocks. Ahern made the comments in his daily newsletter. “China Last Night.”
However, the China editorial also said China needs to “speed up the improvement of the socialist market economic system” in order to create a multilevel regulatory system around key areas such as technological innovation, information security, and to protect people’s livelihood. It also aims to plug regulatory loopholes and improve regulatory effectiveness.
Alibaba stock fell 2.5%, closing at 170.71 on the stock market today. JD stock dropped 1.8% to 81.73, while NetEase lost 5.2% to 90.78. In addition, Tencent fell 3% to 65.11 while Bilibili plunged 5.9% to 85.80. Pinduoduo lost 2.8% to 104.72.
China’s regulatory crush has hammered China stocks across the board, with market valuations halved.
Alibaba was down 51% from its high of 349.32 in October. JD stock was down 25% from its high of 108.29 in February. Vipshop (VIPS) had plunged 67%, while NetEase is down 33% and Pinduoduo down 51%.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
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